Industry Overview: Commercial Banking

Posted by The Editors on December 3, 2012
In the most basic terms, commercial banks take deposits from individual and institutional customers, which they then use to extend credit to other customers. They make money by earning more in interest from borrowers than they pay in interest to those whose deposits they accept. They're different from investment banks and brokerages in that those kinds of institutions focus on underwriting, selling, and trading corporate and municipal securities.

Most of us maintain checking accounts at commercial banks and use their ATMs. The money we deposit in our neighborhood bank branch or credit union supports economic activity through business loans, mortgages, auto loans, and home repair loans. Banks also provide loans in the form of credit card charges, and render local services including safe deposit, notary, and merchant banking. The bank branch or credit union office remains the cornerstone of Main Street economic life.

The 1999 repeal of the Depression-era Glass-Steagall Act, which limited the businesses in which commercial banks could operate by legally separating commercial and investment banking, created huge new areas of business as well. As a result of the repeal, many commercial banks went into nontraditional commercial banking businesses such as selling insurance products and securities. (For example, the investment banking firm J.P. Morgan bought commercial bank Chase in 2000 to become JPMorgan Chase.)


Deregulation, Consolidation, and the Danger of "Too Big To Fail"
For decades, banks profited by simply holding customers' money and charging them check-writing fees and interest on loans. Jobs were well defined and stable, and the paths to promotion were clear and secure. But recent deregulation has led the industry on a different path. 

Up until 1999, the Glass-Steagall Act, passed by Congress in 1933, served as the backbone of banking regulation. During the late '90s, however, banks and other financial institutions found ways around the restrictions placed on them by Glass-Steagall and related legislation leading to a repeal of the act in 1999. President Bill Clinton signed into law the Financial Services Modernization Act of 1999, or the Gramm-Leach-Bliley Act, which allowed commercial banks to own investment banks. This gave financial services giants fuel to grow without limitation. 

The 2008 recession brought about further consolidation as ailing financial institutions sought out stable partnerships. Perhaps the best example is Bank of America, a traditionally commercial bank that purchased struggling mortgage giant Countrywide Financial early in 2008 and later in the year completed a $50 billion acquisition of Merrill Lynch & Co., Inc. The consolidation will make Bank of America the largest financial services company in the world.

Throughout 2008 and 2009, however, economists questioned the value of Titanic-sized banking. The government ended up bailing out several financial institutions such as Citigroup and AIG, claiming that they were too big to fail and thus needed government intervention. Now, however, some policy-makers are questioning the value of holding up these behemoth institutions, as the government proposes new legislation to regulate them.


Record levels of consumer debt and personal bankruptcies, along with the real estate bubble pop and the recession, have dampened prospects for commercial banks. Many fear that the dueling budget and trade deficits in the United States aren't sustainable. Protecting customer information and transaction data from cyber threats is another area banks are concerned with, and many are working to upgrade their enterprise protections. Because problems in the market inevitably affect banks, many are putting new emphasis on upgrading risk management capabilities in case something goes awry.

Online Banking
Although the ability to deal with one's bank account over the Internet certainly isn't new, it has drastically increased in popularity, almost universally. Now, many customers of banks do all of their banking online, without ever having to visit an actual brick-and-mortar bank branch. Like with many industries touched by increasing use of the Internet, this has had a negative effect on job growth in the industry.

How It Breaks Down:

The most important distinction for job seekers to keep in mind is the one between regional banks and the big global ones. Here, we've broken down the industry by type of banking, rather than size of player, because banks are increasingly adding new services to their array of traditional ones.

Consumer or Retail Banking

This is what most people think of when they think of banking: A small to mid-sized branch with tellers and platform officers-the men and women in suits sitting at the nice wooden desks with pen sets-to handle customers' day-to-day needs. Although thousands of small community banks, credit unions, and savings institutions still exist, employment opportunities in this sector are increasingly coming from a few mega-players such as Bank of America and J.P. Morgan, which have built national-and even international-banking operations.
In addition to extending their consumer-banking operations, many of the larger banks have added to their investment banking and asset management capabilities. Make sure you're applying to the right part of a large diversified organization.

Business or Corporate Banking

Many of the players in this group are the same ones in the consumer banking business; others you'll find on Wall Street rather than Main Street. At the highest level, the larger players provide a wide range of advisory and transaction management services to corporate clients. Depending on which institution and activity area you join, the work can resemble branch banking or investment banking.

Securities and Investments

Traditionally, this field has been the domain of a few Wall Street firms. However, as federal regulations have eased, many of the biggest commercial banks, including Bank of America and JPMorgan, have aggressively added investment banking and asset management activities to their portfolios. For anyone interested in corporate finance, securities underwriting, and asset management, many of these firms offer an attractive option. Be aware, though, that hiring for these positions is frequently done separately from that for corporate and consumer banking and experts predict the recession will have continue to have a much stronger negative impact on the job outlook in these areas as opposed to commercial banking.

Nontraditional Options

Increasingly, a number of nonbank entities are offering opportunities to people interested in financial services. Players include credit card companies such as American Express, MasterCard, and Visa; credit card issuers like Capital One; and credit reporting agencies such as Experian. Although people at these firms are still in the money business, the specific jobs vary greatly, perhaps more widely than jobs at traditional banks. In particular, given the volume of transactions that many of these organizations handle, opportunities for people with strong technical skills are excellent.

Job Prospects:

Two of the major trends in banking in the past decade have been consolidation (e.g., the acquisition of Wachovia by Wells Fargo, or the takeover of FleetBoston by Bank of America) and the increasing use of technology (e.g., online banking). Both of these trends have had and will continue to have a negative effect on job growth in the industry. Indeed, the U.S. Bureau of Labor Statistics has reported that the number of jobs in the banking industry is likely to decline by 2 percent between 2004 and 2014, as compared to an expected overall growth in the number of jobs in the U.S. of 14 percent during that time.
But it's not all bad news in banking; the U.S. population is growing, and new population centers are emerging all the time, so there will be new jobs available in new locations. And while opportunities for bank tellers and back-office clerical workers stagnate, financial analysts, financial advisors, trust officers, marketing pros, and techies will enjoy growing opportunities as the baby boom generation ages and bank operations become increasingly automated.

In fact, many banks are actively preparing for the retirement of the baby boom generation by launching talent management programs designed to look at training, performance management, and workforce planning as related parts of a bigger whole. The emphasis on retail banking and the repeal of Glass-Steagall have created opportunities for people in banking to become providers of a suite of financial products, rather than just bank tellers. In coming years, look for more opportunities for financial services sales reps and fewer opportunities for loan officers and others with only a limited knowledge of the full array of financial products banks can now sell.

What's Great:

The Three Ps
The three Ps in banking are pay, portability, and promotions. As the line between investment and commercial banking continues to blur, commercial banks increasingly have to match Wall Street salaries. And, regardless of whether you join the commercial or investment banking ranks, you'll pick up skills that you can easily take with you to other jobs in finance.

Prima Donnas Need Not Apply

If you're just not the I-banking type and your selling style is less in-your-face than what most brokerages seem to be seeking, banking may be where you belong instead-unless, of course, you want to join the I-banking operations of one of these players. An MBA is helpful but not a prerequisite to future success. Your degree, graduate or undergraduate, doesn't have to be a highly prestigious one. You still need to be smart, detail-oriented, good with numbers and people, and resilient in the face of fairly constant change, but otherwise, most banks aren't high-stress, difficult places to work. And it's not against the rules to be nice to your colleagues.

What's To Hate:

How Do You Feel About Change?
Mergers, competition, changing markets, and evolving technology mean fewer jobs and more uncertainty. Even as you read this, banks are plotting and negotiating the next big banking acquisition or merger. They have to in order to survive. There was a time when all you had to do to keep your job at a bank was remain faithful and stroke the boss's ego. These days, however, even faithful and competent sycophants are getting pink slips. When it comes to putting your career on the edge, banking is not Silicon Valley. But no one would mistake it for the civil service, either.

The Great Banking-Services Robbery

Brokerages, corporations, and insurance firms have snatched bank products and successfully made off with them. Fidelity, AT&T, Ford, and the rock group Kiss have all marketed credit cards. Some mutual fund companies allow customers to write checks and take out loans against their accounts. Banks no longer have payment processing, mortgages, or ATMs to themselves either. No matter what area of banking you're interested in, remember that brokerages and virtually every other type of financial institution are embarking upon an unstated mission-to make the banking job you want obsolete. Just so you know.

Bank on Longer Hours

Once upon a time, banking was a 9-to-5 job. But, increasingly, bankers' hours are coming to resemble those of brokers and consumer product marketers. What's more, as brokerages, securities firms, and insurance companies move into banking, their take-no-prisoners culture could mean even longer work hours for folks in the industry. Banking may still be better than a lot of jobs for semi-fast-track moms and as-yet-undiscovered Broadway stars, but your seat on the 5:04 commuter train now belongs to someone else.

The jobs available at different commercial banks vary significantly according to the scope of their operations. Mega-banks offer a huge variety of positions, from hard-core programming spots to investment banking and trading. Small and regional banks tend to have a smaller range of more traditional positions (loan officer, teller, credit analyst, etc.).

Loan Officer

Many a bank executive has started in this job. Many will continue to do so. Loan officers determine, based on the bank's criteria and an ever-improving intuition and instinct, who gets loans (and on what terms) and who does not. There's a fair amount of schmoozing in this job, either at the local chamber of commerce and Rotary Club or overseas in emerging markets. If you prefer to crunch numbers in private and deal with people only occasionally, this isn't the job for you. But an accounting whiz with sales skills and diplomacy will thrive.
Salary range: $30,000 to $120,000.

Branch Manager

This is a great way to learn the industry. A merger could temporarily derail your career; but the risk may be worth it if you want to learn all there is to know about banking. This is a bit like the principal of a K-6 elementary school. You cannot be an imperious executive. But if you manage operations well and take good care of your upper management, staff, and customers, everyone will be happy to reward you. Many of these people have been promoted from a position as a loan officer.
Salary range: $40,000 to $150,000.

Bank Teller
This is the front line in the banking world-and possibly the position most likely to feel the shock waves from banking consolidation and automation. In addition to having extensive customer contact, tellers have to have a good feel for numbers, a willingness to handle large amounts of cash, and an attention to detail. There are more than 500,000 tellers in the United States; most work 9 to 5, and one-third work part-time.
Salary range: $20,000 to $40,000.


Financial institutions have a huge need for programmers and people with technical skills: Citibank boasts that it has more software programmers than Microsoft does. Specific responsibilities can range from managing network systems to coding applications for a wide variety of transaction-oriented processes to modeling bank functions such as loan approvals and risk management. Positions usually require specific platform experience or programming knowledge.
Salary range: $35,000 to $150,000.


Sales is another relatively sure prospect for the uncertain future. Banks are competing with brokerages, investment banks, and mutual funds, all of which offer more obvious and alluring opportunities in sales. If you seem to have a talent for this and you'd like a chance to be a big fish earlier than all the B-school hotshots, then a commercial bank might be just the pond for you. Demand is also rising for salespeople who understand product development and for investment managers (brokers). An undergraduate degree in finance, business, or economics gets you in the door. An MBA gets you a second interview.
Salary range: $30,000 to $150,000 or more (commissions and new business you bring in can add substantially to these figures).

Trust Officer

Give this area a shot if you have a flair for financial counseling and if you like hobnobbing with high-net-worth individuals. The job involves helping clients with trust services, estate planning, taxes, investing, and probate law. Warning: Sooner or later you'll find yourself in the middle of family squabbles, jealousies, disinheritances, and lawsuits. This job requires diplomacy, tact, deference, and a better, more current understanding of tax law than most attorneys need.
Salary range: $45,000 to $80,000.

Getting Hired

Many roads lead into the commercial banking world. At the bottom end, you can apply to your local branch for a number of different positions. At the corporate level, the large banks hire hundreds of people from college and graduate programs each year; they hire even more from industry, especially for positions requiring certain types of knowledge or experience: programming, credit analysis, marketing, and so on. Many of the largest players also have extensive job listings on their websites and solicit electronic resumes. If you want to get a foot in this industry, keep these things in mind:

.    In banking, most jobs relate in some way to convincing people to part with their money (checking, savings, investing) or to take yours (credit, loans) and pay you surcharges for the privilege of doing either. Financial skills are only part of the job. To excel, you need some serious interpersonal skills as well.
.    Bankers' hours ain't what they used to be. Increasingly, banks are looking for talented, competitive individuals with the desire to work hard to beat the competition. Expect an extensive interview process. At banks, you have to talk to lots and lots of people before you get hired. And then you have to talk to some more just so they can all be in complete agreement about what a wonderful addition you'll be to the bank and its customers.
.    Commercial banking remains a relatively conservative industry. To make a positive impression on your interviewer: Wear a suit. Don't wear patterned stockings. Address no one by his or her first name, not even in California, not even on casual Friday. And smile. No matter how much your brand-new dress shoes are pinching your feet, smile and have a warm handshake at the ready.
.    Especially for corporate jobs, you'll be expected to have some knowledge of the changes going on in the financial services sector-and an opinion about them. Also, you'll want to keep an eye on the business section of the newspaper-at least while you're interviewing-to make sure that you catch the headline about your potential employer merging with another firm.